I’m reading “Aftershock: Protect Yourself and Profit in the Next Global Financial Meltdown” by Wiedemer, Wiedemer, and Spitzer. They claim to have seen the current recession coming before it happened, the result of the popping of various bubbles in our economy, including in the housing and credit markets. Interestingly, and perhaps most frightening, the authors believe that things will get worse, yet. You see, while national leaders are talking about the recession like it’s the result of a down cycle in the market, just another downturn following the growth of the last few years, the growth they are promising cannot come about without either a new bubble–which must eventually pop–or dramatic increases in productivity. It’s a scary proposition they are prophesying, and while they believe there are ways to survive and even make money in it, the sheer size of the next bubble is terrifying.
As bad as the financial judgment of the private sector bankers and investment bankers is, even worse is the incredible irresponsibility and bad judgment of the public sector–the U.S. government. They have been involved in the biggest bad loan of them all: the monstrous government debt bubble. We can’t possibly pay it off. Our tax base in a good year is only $2.5 trillion. In a bad year, it’s less. The total government debt bubble will soon be over $11 trillion and rising rapidly to $15 trillion. Even if we directed 100 percent of our taxes to paying it off, it would take at least six years, assuming interest rates stay at their current incredibly low level. What if interest rates rose to 10 or 15 percent? We would have a hard time just paying the interest!
I find it noteworthy that the authors, while damning political leaders for their irresponsibility in debt creation, do not pull punches for either of the two major parties. Both are at fault. As a good friend of mine likes to observe, both conservatives and liberals have done a good job of spending in recent years–they just spend for different things.
Maybe Economics 101 should be required for freshman Congressmen and Senators in addition to the other orientations for a newly elected politician takes office in the Capitol. The basics of supply and demand, to say nothing of budgeting and spending, could be considered as important as ideological purity, if not more so.
- This is not a recession; this is the new economy (bilerico.com)
- Why are investors turning against US government debt? (bbc.co.uk)
- Warning: Asset bubbles underway (financialpost.com)
- Why the greatest global stimulus plan in history will fail by 2012 (thehill.com)
- Bursting bubbles (ftalphaville.ft.com)
- 10 Market Bubbles That Could Soon Burst (dailyfinance.com)